Accumulate Cadila Healthcare; tgt of Rs 729: Dolat Capital

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Accumulate Cadila Healthcare; tgt of Rs 729: Dolat Capital

Dolat Capital is bullish on Cadila Healthcare and has recommended accumulate rating on the stock with a target of Rs 729 in its February 08, 2012 research report.

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Dolat Capital is bullish on Cadila Healthcare and has recommended accumulate rating on the stock with a target of Rs 729 in its February 08, 2012 research report.

"Cadila Healthcare's (CHL) revenue grew 18.5% YoY to Rs 13.8bn, led by US generics, domestic formulations and Japan. Higher contribution from JVs added to the growth momentum. The US generics business grew at a healthy 45% YoY despite any significant product launches. Growth excluding Nesher was 27% YoY. The management is confident of resolving compliance issues pertaining to the Moraiya plant; scheduled re-inspection within a month. Domestic formulations (34% of sales) showed a recovery during Q3FY12 and grew by 17.7%. This was driven by new product launches and Biochem consolidation (revenue contribution of Rs 100mn). Consumer Wellness division continues to disappoint, showing a decline of 12.3% YoY, impacted by 1) aggressive MNC competition faced by Everyuth and 2) slowdown in the market for Sugarfree brand. The management appears confident of achieving normalization in subsequent quarters."

"EBITDA margins stood lower at 18.9% (down 300bps YoY) mainly due to higher raw material and employee costs on account of the Nesher, Bremer and Biochem consolidation. Higher R&D expenditure during the quarter (Rs 1.1bn at 8% of sales) also contained margins. CHL has recorded an unrealised forex loss of Rs 342mn for the quarter, of which Rs 24mn was reported at EBITDA level and Rs 318mn was adjusted with interest expenses. PAT consequently fell by 7.9% YoY to Rs 1.49bn. However, adjusted for the forex loss, PAT stood at Rs 1.77bn."

"Uptick in domestic formulations and traction in formulation exports, along with the JVs yet to realise full potential, ensure higher revenue visibility. We have revised our FY13E earnings estimate downwards by 4.8% to reflect a gradual absorption of integration costs incurred on acquired entities. Near term trigger is the resolution of the compliance issues at the Moraiya plant. At CMP of Rs 660, the stock trades at 19.3x FY12E and 16.3x FY13E earnings. We maintain our Accumulate rating on the stock with a revised target price of Rs 729 (18x FY13E EPS)," says Dolat Capital research report.  

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To read the full report click on the attachment